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  1. Point in time
    2014-06-30

BSOG 3.1 Introduction

The Purpose of this Chapter

BSOG 3.1.2 G

It is for the directors of a society to assess the case for transfer, and they must explain and recommend their decision to the members. However, the Prudential Regulator's2 staff are willing to discuss with a society the procedures to be followed and the information required to ensure that the members can reach fully informed decisions. Societies are strongly recommended to consult the Prudential Regulator2 early on in the formative stages of transfer proposals. Such consultation will, of course, be treated in the strictest confidence. It will be helpful, also, to have regard to the indicative timetable set out in BSOG 3.92.

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BSOG 3.1.3 G

Societies should consult their own legal advisers about the application of the provisions of the 1986 Act, and the general law, to the particular features of a proposed transfer.

BSOG 3.1.4 G

This chapter considers each stage of the transfer procedure in chronological order. The remainder of this section gives a synopsis of the relevant requirements of the 1986 Act, which are then discussed in more detail in subsequent sections, as follows:

  1. (1)

    BSOG 3.22, Preliminary Matters, considers the rationale for a transfer and the handling of public announcements, and gives guidance on certain prudential issues.

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  2. (2)

    BSOG 3.32, Terms of a Transfer, considers the mandatory provisions of Section 100 of the 1986 Act concerning the successor company's obligation to treat former shareholders of the society as depositors with it, and the Statutory Cash Bonus. It also considers the mandatory provisions of Sections 102B to D of the 1986 Act, concerning distributions to members who are Trustee Account Holders, the statutory restrictions on distributions to members in Section 100, and the permissive provisions of Sections 100 and 102A. The protective provisions for specially formed successor companies are also discussed.

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  3. (3)

    BSOG 3.42, Information Provided to Members, discusses the form and content of the statutory Transfer Statement and the Transfer Summary, and the accompanying rationale and other statements by the board, and describes the form of application to be made to the Prudential Regulator for approval of the Transfer Statement.

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  4. (4)

    BSOG 3.52, General Meetings and Resolutions, discusses the register of members and members' entitlement to vote, the arrangements for general meetings, the conduct of voting on the Transfer Resolutions and the scrutineers' report.

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  5. (5)

    BSOG 3.62, Confirmation, describes the form of application to the Prudential Regulator for confirmation of a transfer, and the procedures which the Prudential Regulator expects to follow in considering and hearing written and oral representations and in reaching its decision.

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  6. (6)

    BSOG 3.72, Transfers Under Direction, describes the modified procedure to be followed when a society has been directed by the Prudential Regulator to transfer its business to a company and to proceed by board resolution.

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  7. (7)

    BSOG 3.82, Notification and Dissolution, briefly discusses the process of notification of the vesting date and dissolution of the society.

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  8. (8)

    BSOG 3.92, Timetable, reviews the several stages of a transfer from start to finish.

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Statutory Requirements

BSOG 3.1.5 G

The provisions of the 1986 Act concerning transfers are in Sections 97 to 102D of, and paragraph 30 of Schedule 2 and Schedule 17 to the 1986 Act, where two types of transfer of business are provided for:

  1. (1)

    to a specially formed company, known as conversion; or

  2. (2)

    to an existing company, known as a takeover.

The procedures are the same in each case, except that the specification of the turnout required to pass the shareholding members' resolution to approve a takeover is, in effect, higher than is required to approve a conversion. The 1986 Act also provides that a specially formed company shall have qualified protection from takeover for up to five years after the vesting date.

[Note: a takeover may take the form of a transfer of business of a society to a subsidiary of the society which is an existing company carrying on business as a going concern, as in the case of Halifax plc (formerly Halifax Syndicated Loans Limited).]

BSOG 3.3 Terms of a Transfer

The Successor Company

BSOG 3.3.23 G

The successor company does not need to have the required permission under the Act at the time of the takeover offer or the Transfer Agreement; but it must be carrying on business as a going concern. However, the subsequent obtaining of the necessary permission is a key criterion. An offer will not be credible unless the company has first obtained an indication from the Prudential Regulator or other EEA competent authority that it is prepared to authorise, or to continue the authorisation of, the successor company, upon transfer on terms which will enable it to carry on the business it will have following the transfer. As a practical matter, the authorities would find it difficult to authorise an institution whose business from the time of authorisation was not predominantly banking or deposit taking and would require to be satisfied that the parent company (if any) as controller was fit and proper.

BSOG 3.4 Information provided to Members

Application and Prudential Regulator Approval

BSOG 3.4.17 G

The Prudential Regulator's approval of the Transfer Statement will be confirmed by returning to the society one authenticated copy of the Transfer Statement with the Prudential Regulator's certificate of approval signed by an authorised signatory for the Prudential Regulator. The society will be asked to give 50 copies of the printed Transfer Document and Transfer Summary, if any, to the Prudential Regulator when they are available. There is no statutory requirement for copies of the Transfer Statement and Transfer Summary to be placed on the public file of a society but, because they are both public documents, the Prudential Regulator will arrange for copies of the Transfer Document and Transfer Statement, if printed separately, to be placed on the public file. If a public announcement of the transfer proposal is not to be made until after the Prudential Regulator has approved the Transfer Statement, or until the Transfer Document is sent to the society's members, the Document and Statement will not be placed on the public file until after the announcement. None of the other documents referred to in paragraph BSOG 3.4.15 G above will be placed on the public file.

BSOG 3.6 Confirmation

Scope of the Prudential Regulator's Powers1

BSOG 3.6.7A G

1However, the FCA does have power, on the written application of certain members, to direct that the member has the right to obtain names and addresses from the society's register of members. Before it gives such a direction, the FCA is required to be satisfied that the member requires that right for the purpose of communicating with other members of the society on a subject relating to its affairs, and must have regard to the interests of the members as a whole and to all the other circumstances (paragraph 15 of Schedule 2 to the 1986 Act). A fee is payable by the applicant. Chapter 1A of this Guide gives guidance on applications for access to the register of members.

The Prudential Regulator's decision1

BSOG 3.6.33 G

The Prudential Regulator1 will not give an oral decision at the end of the hearing, and will1 reserve its decision to be issued later in writing, setting out its reasons. Copies of the written decision will be sent to the participants, and can be purchased by any other person. The Prudential Regulator1 will ask the FCA1 to place a copy on the public file of the society.

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BSOG 3.8 Notification and Dissolution

BSOG 3.8.1 G

When the Prudential Regulator has confirmed a transfer (whether voluntary or under direction) it will notify the FCA and the society concerned.

BSOG 3.8.2 G

Section 97(8) of the 1986 Act requires the society to notify the Prudential Regulator and the FCA2 of the vesting date, and it must do so no later than 7 days before that date, and, unless a notice is given under subsection (10), subsection (9) provides that the society shall be dissolved on that date. Subsection (10) provides that, if necessary for the purpose of facilitating the disposal of its shares in its successor, the society may include, in the notice of the vesting date, notice of a later date for the dissolution of the society, and it is on this later date that the society is dissolved. A society which gives such a notice must cease to transact any business as from the notified vesting date, except such as may be necessary to dispose of its shares in its successor.

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BSOG 3.8.3 G

Section 97(7) of the 1986 Act provides that, where a society continues to hold shares in its successor after the vesting date, the consideration for the disposal of those shares, together with any other property, rights or liabilities of the society acquired or incurred after that date, shall be transferred to and vested in the successor company on the date specified for the society's dissolution. All other property, rights and liabilities of the society are to be transferred to the successor company on the vesting date.

BSOG 3.8.4 G

The FCA2 will record the relevant date, or dates, notified to the Prudential Regulator and the FCA2 by the society.

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BSOG 3.8.5 G

The society will be dissolved on the vesting date or on the later date for dissolution referred to in BSOG 3.8.2 G, and its registration will subsequently be cancelled by the FCA12 under the provisions of Section 103(1)(a) of the 1986 Act having consulted the PRA.1

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BSOG 3.9 Timetable

BSOG 3.9.1 G

The society will need to draw up a project plan covering the key elements in the transfer process and the relationships between them, and specifying when it wishes to receive the necessary clearances from the Prudential Regulator1. The time needed for the process will depend, among other things, on the length of time it takes to settle the final terms of the distribution scheme, the complexity of those terms and whether the scheme raises new legal issues (perhaps requiring resolution by application to the High Court), and the time needed to verify the register of members and the record of Trustee Account Holders. It will also be affected by the facility with which the society and its advisers can develop satisfactory documents and respond to enquiries and representations. The plan and the timetable will, of course, need to cover all that will be required of the society, and the successor company, in relation to the requirements of the Banking Regulator, and of the FCA1 concerning the listing of any shares in the successor company.

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BSOG 3.9.2 G

It will be helpful for the society to discuss its plans with the Prudential Regulator1 during their formative stages, when the Prudential Regulator1 will be prepared to give a view on their feasibility. However, although the Prudential Regulator1 may agree that a planned timetable appears to be manageable, it cannot undertake to meet any deadlines set by the society. In particular, the Prudential Regulator1 cannot be constrained in the proper performance of its statutory functions by, for example, the society's wish to put the Transfer Resolutions to a SGM on or before the date of the AGM in that year, or the planned flotation date. The Prudential Regulator1 will be mindful of the need to ensure that there is adequate time, compatible with its other business and commitments, to:

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  1. (1)

    consider whether the proposed distribution scheme is in conformity with the 1986 Act;

  2. (2)

    consider and approve the Transfer Statement, including time to deal with renewed applications if significant changes have to be made;

  3. (3)

    give interested parties an opportunity to make considered representations at the confirmation stage, for the society to respond to those representations, and for the Prudential Regulator1 to consider all the evidence and arguments, including making any necessary further enquiries of its own, and to meet any statutory requirement for consultation1; and

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  4. (4)

    write a reasoned confirmation decision.

BSOG 3.9.3 G

The likely sequence of events is as follows:

Stage 1

Informal preliminary discussions with the Prudential Regulator1 and, if different, the Banking Regulator on both substance and timing of the proposed transfer.

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Stage 2

Public announcement of the transfer proposals. The Prudential Regulator1 will be ready to comment on drafts of the announcement and any supporting material, although the terms of the announcement are for the society to decide and the Prudential Regulator1 is not required to approve them.

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Stage 3

Consultation with the Prudential Regulator1 on the outline structure of, and main features to be contained in, the Transfer Statement, and on the full specification of the proposed cash and/or share distribution scheme.

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Stage 4

Submission to the Prudential Regulator1 of the prudential information described in BSOG 3.21.

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Stage 5

Initial application to the Prudential Regulator1, with the appropriate fee, for approval of a full draft of the Transfer Statement, contained within a draft Transfer Document, supported by the material described in BSOG 3.4.12 G.

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Stage 6

Consideration by the Prudential Regulator1, and discussion with the society and its advisers, of the draft documents, including submission by the society of revised drafts as necessary. At this stage, the Prudential Regulator's1 staff will also be ready to comment informally on draft proxy forms and other material proposed to be sent to the members with, or in advance of, the Transfer Document. By this stage also, the society ought to have undertaken any mailing to members which it thinks necessary to verify its register of members (see BSOG 3.5.14 G to BSOG 3.5.17 G), and to notify them of the rights of Trustee Account Holders (See BSOG 3.3.18 G).

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Stage 7

(if necessary) Further application to the Prudential Regulator1, with a further fee, for approval of a significantly revised Transfer Statement (see BSOG 3.4.14 G).

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Stage 8

Production of printer's proofs of the draft documents. At this stage it will be advisable for the society to determine, perhaps by mailing to a sufficient number of staff, whether the notice and Transfer Document pack (especially if it contains the Transfer Statement) is deliverable through domestic letter boxes.

Stage 9

Informal indication by the Prudential Regulator1 that it is satisfied with near-final proofs of the Transfer Statement, and the Transfer Agreement.

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Stage 10

Formal submission to the Prudential Regulator1 of the final draft of the Transfer Statement, together with the supporting documents described in paragraph BSOG 3.4.15 G.

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Stage 11

Approval by the Prudential Regulator1 of the Transfer Statement. One proof copy of the Statement, identified and signed on behalf of the Prudential Regulator1, will be returned to the society.

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Stage 12

Printing and distribution of meeting notice and Transfer Document to members of the society in time to be received by them at least 21 days before the last date for receipt of proxy forms for the meeting at which the Transfer Resolutions are to be moved. The Prudential Regulator1 would appreciate being provided with a number (to be agreed) of copies of the final printed Transfer Document and any Transfer Summary and of the Transfer Statement if printed separately for distribution on request. Although not required by the 1986 Act, one copy of each will be passed to the FCA1 to be placed on the public file of the society.

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Stage 13

The meeting at which the Transfer Resolutions are moved.

Stage 14

If the Transfer Resolutions are passed, application to the Prudential Regulator1 for confirmation and publication of notices of that application in the official Gazettes and newspapers. The application should be accompanied by the requisite fee and the material specified in BSOG 3.6.2 G.

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Stage 15

Last date for receipt by the Prudential Regulator1 of representations with respect to the applications. A minimum of four weeks should be allowed between Stages 14 and 15 and a further four weeks to Stage 16 (with extra time allowed for any public holidays which intervene). Representations will be copied to the society for its comments as and when they are received. The Prudential Regulator1 will then require sufficient time before the hearing to consider and assess all the representations and the society's responses, and to make any further enquiries which it may think necessary.

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Stage 16

The confirmation hearing.

Stage 17

Notification to the society and representers, and publication, of the Prudential Regulator's1 Decision. It is advisable to allow a minimum of four weeks between Stages 16 and 17, again allowing extra time for any public holidays.

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Stage 18

Notification by the society to the Prudential Regulator and the FCA1 of the vesting date and, if later, the date of dissolution of the society.

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Stage 19

Vesting date and, if later -

Stage 20

Dissolution of the society.